A. Labour Market Development Agreements – Employment Benefits and Support Measures

In 1996, the unemployment insurance system was renamed “Employment Insurance” (EI) and reformed to recognize two parts: one, providing income support to unemployed people who had paid EI premiums; and two, offering a suite of employment programs to unemployed clients to prepare them to get back to work quickly. The Employment Insurance Act also gave provinces and territories the ability to deliver these training programs.[2] The original LMDAs date back to the beginning of the process of devolution of labour market training to the provinces in 1996. The first bilateral agreement was signed with Alberta in December 1996 and implemented in November 1997. Getting all the provinces and territories on board has been a long process, culminating with the recognition in Budget 2007 that the provinces and territories have the primary responsibility in the design of labour market training programming and its delivery, and the signing of the last bilateral agreements by 2010.[3]

EBSMs were also set up in 1996 and funded through the LMDAs. They offer different programs and services to the unemployed or those who have no attachment to the labour market to assist them in pursuing education or finding employment. The Committee was told there has been little change in terms of this programming since 1996, despite substantial change in the labour market and the Canadian economy. Mary-Lou Donnelly, Commissioner for Workers, Canada Employment Insurance Commission, told the Committee that the renewal process of the LMDAs should make sure that the new generation of agreements are relevant to the reality of current workers and employers.[4] As well, Matthew Mendelsohn, Director, Mowat Centre, spoke of the restructuring of the labour market, giving the example of Ontario:

During that time [1996 to today], though, we have had enormous changes in the labour market. In Ontario we’ve seen dramatic declines in the manufacturing sector. Across the country, we have seen a rise in precarious work, part-time work, and multiple job-holders. We have also seen a restructuring of various sectors, which has created long-term unemployment for many middle-aged people who used to work in the manufacturing sector, particularly in central Canada.[5]

Matthew Mendelsohn
Mowat Centre

The LMDAs are in the process of being renewed to better reflect the evolving Canadian labour market. ESDC is having discussions with provinces and territories, holding roundtables with stakeholders and undertaking consultations online with employers to gain their points of view on “how to make the LMDAs more employer-driven and responsive to the needs of the labour market.”[6] The Committee’s study will bring further insight to decision makers involved in the renewal of LMDAs.

The majority of witnesses who testified before the Committee recognized the importance of LMDAs in addressing Canada’s skills challenges and shaping labour market programming and policy in Canada.

As the next generation of LMDAs come on stream over the next decade, Canada’s labour market will undergo profound changes as labour force growth slows and baby boomers continue their transition from work to retirement. Adapting to this new normal will require a stronger focus on investments in skills and more effective LMI [Labour Market Information] and program design.[7]

Tyler Meredith
Institute for Research on Public Policy

We want to point out the important role that LMDA funds have played in assisting unemployed workers train for and find new employment. A tracking study of laid-off workers conducted by a McMaster University researcher documented the improved outcomes for laid-off workers who had access to training programs.[8]

Cammie Peirce
Unifor

For background, we are a 900,000-job industry generating over $120 billion in economic activity. However, in the next decade we will see approximately 100,000 job vacancies to fill. That means our industry and government need these LMDA dollars to be as effective as possible in getting Canadians employed, and perhaps more importantly, though, not just into jobs but into careers.[9]

Bard Golightly
Canadian Home Builders’ Association

While we realize that LMDAs will not provide solutions to all of the labour and skills issues our industry faces, they certainly are our key tool in working towards solutions.[10]

Craig Martin
Canadian Welding Bureau

According to Frank Vermaeten, Senior Assistant Deputy Minister, ESDC, the federal government intends the new generation of LMDAs to:

• better prepare Canadians for the labour market of the future;
• obtain a larger return on investment in training by getting better outcomes in terms of unemployed individuals being matched with meaningful employment;
• enhance performance measurement and report on meaningful employment outcomes;
• increase the involvement of employers in training decisions as well as their investment in labour market programming;
• address the skills gaps where they exist and make sure the right kind of training is going to the right people;
• ensure greater individual responsibility when it comes to choosing training programs, paying for training and encouraging mobility;
• set mechanisms to target and refer EI clients earlier in their benefit period;
• ensure eligibility criteria will meet the evolving labour market needs; and
• generate more EI savings by examining such options as pay-for-performance.[11]

Currently, at the federal level, the key objectives of LMDAs are for EI active clients to find employment and return to work more quickly, resulting in savings to the EI account, and to decrease the skills mismatch so that workers get the training they need to find meaningful employment and employers can hire the skilled employees that they need.

LMDAs finance EBSMs through the federal government’s transfer of part of the EI account to the provinces and territories. All provinces and territories have transfer agreements in place, although the design and delivery of services is not identical in each case.

All EBSMs are included in Part II of the Employment Insurance Act. Employment benefits are available to claimants with active EI claims and those who have established a benefit period in the last three years (or the last five years for maternity or parental benefit claimants). Support measures are available to all unemployed individuals. According to section 57(2) of the Act, the Canada Employment Insurance Commission works in concert with provincial and territorial governments to design EBSMs, determine how they will be implemented and establish a framework to evaluate their outcomes. The legislated guidelines for EBSMs are as follows:

57. (1) Employment benefits and support measures under this Part shall be established in accordance with the following guidelines:

(a) harmonization with provincial employment initiatives to ensure that there is no unnecessary overlap or duplication;

(b) reduction of dependency on unemployment benefits by helping individuals obtain or keep employment;

(c) co-operation and partnership with other governments, employers, community-based organizations and other interested organizations;

(d) flexibility to allow significant decisions about implementation to be made at a local level;

(d.1) availability of assistance under the benefits and measures in either official language where there is significant demand for that assistance in that language;

(e) commitment by persons receiving assistance under the benefits and measures to

(i) achieving the goals of the assistance,

(ii) taking primary responsibility for identifying their employment needs and locating services necessary to allow them to meet those needs, and

(iii) if appropriate, sharing the cost of the assistance; and

(f) implementation of the benefits and measures within a framework for evaluating their success in assisting persons to obtain or keep employment.[12]

Under section 63 of the Employment Insurance Act, the Canada Employment Insurance Commission, with the approval of the Minister, has legislative authority to reimburse provinces and territories, as well as other organizations, for the costs of labour market programming that is similar to the EBSMs.

EBSMs are made of two parts. First, employment benefits for EI claimants and former claimants are provided through five programs:

• Skills Development-Regular and Skills Development-Apprenticeship;
• Targeted Wage Subsidies (TWS);
• Self-Employment (SE);
• Job Creation Partnerships (JCP); and
• Targeted Earnings Supplements (TES).

Many witnesses praised the outcomes of the skills development (SD) programs, which cover the costs of training for EI clients to get back to work as quickly as possible.

The last two EI monitoring assessment reports provide details about recent net impact evaluations of LMDA programs. The evaluations show that the skills development programs are very effective. These involve the longer-term training interventions, which often lead to a credential. According to the evaluations, skills development programs increase the incidence and duration of employment, and increase earnings for people over both the short and medium terms.[13]

Barbara Byers
Canadian Labour Congress

This long-term evaluation has found very large impacts for the skill development programs. These programs are for unemployed people who are on benefits and can qualify for training. We look at the impact on four types of outcomes: their earnings, their probability of being employed, their probability of being on EI, and the amount of benefits they claim on EI for one and up to five years after they have gone through this program.[14]

Miana Plesca
As an Individual

The second part of EBSMs consists of the support measures. They include:

• Employment Assistance Services (EAS);
• Labour Market Partnerships (LMP); and
• Research and Innovation (R&I).

Employment assistance services support clients through job counselling, sharing of labour market information and search tools such as job banks, writing résumés, networking and other services as needed. These measures are available to all Canadians, including those who do not meet the eligibility criteria for employment benefits.

According to the president of the Réseau des carrefours jeunesse-emploi du Québec, employment assistance services cost little but have noteworthy outcomes. This witness, who represents a network of organizations that deliver employment assistance services, stated that “[a]ccording to a recent report by Raymond, Chabot, Grant, Thornton, the activities of the Réseau des carrefours jeunesse-emploi du Québec in Quebec generate economic spinoffs of $72 million annually from a government investment of $46 million.”[15] Other testimony includes that of Miana Plesca:

The cheaper one is the employment assistance service, the job search assistance programs where you just teach people how to write their résumé, how to dress for an interview, and what to say at the interview. It is the darling of all labour market programs because it’s very cheap. It doesn’t cost as much as to retrain a worker in a new occupation. You just put them in a classroom or one-on-one interventions and just tell them how to behave at an interview, and it’s very successful. The impacts are modest. They are not huge, but they are very consistent all across time and easy to implement, easy to deliver.

So what has happened is that a lot of the provinces have switched their attention and focus on these employment assistance services because they work and they are cheap. I don’t want to put them down too much, but I think we have to be very careful here because emerging evidence shows that, while they are effective, they are mostly displacement programs. They do not create new jobs; they do not benefit in terms of productivity.[16]

Miana Plesca
As an Individual

B. Statistics related to Labour Market Development Agreements

According to the 2012/13 EI Monitoring and Assessment Report (eimar), 662,260 clients received assistance from EBSMs to prepare for, obtain and maintain employment in 2012–2013. This represented a 2.5% increase from 2011–2012, which is due to a growth in the number of clients (+27,247) receiving employment assistance services. A total of 1,076,271 EBSMs interventions were delivered in 2012–2013, an increase of 11.8% compared with 2011–2012.[17]

The volume of non-insured[18] clients receiving Employment Assistance Services (EAS) grew by 12.7% in 2012–2013, while the number of EI claimants or former claimants decreased slightly. “The number of EAS [interventions increased by 14.2% to 901,062, while the number of Employment Benefits interventions fell by 6.1% to 149,521, a 10-year low.”[19]

The EIMAR shows a trend of a growing demand for assistance from non-insured participants. “Over the past 10 years, the volume of non-insured clients increased by 52%, while the number of active claimants declined at a slower pace (-24.3%). During the same period, former claimants increased by 17.3%.”[20] This is demonstrated in Figure 1.

Figure 1– Volumes by EBSM Client Types (2003/04 – 2012/13)

Source: Canada Employment Insurance Commission, 2012/13 Employment Insurance Monitoring and Assessment Report, Chapter 3, Sub-Section 2.1, Client Types, 2014.

Figure 2 highlights the age distribution of EBSM clients. Older workers and youth together represent 29.5% of all clients who received service in 2012–2013, but the vast majority (69.5%) were aged 25–54, a core working-age group.[21]

Figure 2 – Age Distribution, 2012–2013

Source: Canada Employment Insurance Commission, 2012/13 Employment Insurance Monitoring and Assessment Report, Sub-Section 2.2, Age Distribution, 2014.

In 2012–2013, a total of $2.03 billion was spent on EBSMs. Expenditures on employment benefits, mainly on skills development programs, decreased 2.6 percentage points from the prior year, while remaining the largest expenditure. Figure 3 shows the cost for key labour market programs offered through EBSMs, namely the Targeted Wage Subsidies (TWS), Self-Employment (SE), Job Creation Partnerships (JCPs), Skills Development (SD) and Targeted Earnings Supplements (TES).

Figure 3 – Employment Benefits Expenditures by Intervention,
2012–2013 ($ million)

Source: Canada Employment Insurance Commission, 2012/13 Employment Insurance Monitoring and Assessment Report, Chapter 3, Section 3, Interventions: Employment Benefits, 2014.

On the other hand, “EAS expenditures increased by 1.6% and represented a greater share of the overall expenditures (+1.3 percentage points).”[22] Figure 4 shows EBSM expenditures including employment benefits and employment assistance services, as well as labour market partnerships (LMP) and research and innovation (R&I).

Figure 4 – EBSM Expenditures, 2012–2013 ($ million)

Source: Canada Employment Insurance Commission, 2012/13 Employment Insurance Monitoring and Assessment Report, Chapter 3, Section 5, Expenditures, 2014.

Pan-Canadian activities are the responsibility of ESDC and delivered using EI Part II funds. They include Aboriginal Programming; enhancing investments in Workplace Skills; finding innovations and supporting agreements with provinces/territories and Aboriginal Peoples; and labour market information service.[23]

C. Other labour market agreements

Labour Market Agreements (LMAs), Labour Market Development Agreements for Persons with Disabilities, and the Aboriginal Skills and Employment Training Strategy complement the LMDAs. These three measures target groups of vulnerable workers.

Non-EI eligible individuals can receive skills development and training services provided under LMAs. Employed individuals who lack essential skills and have low levels of literacy are also eligible to receive skills development and training funded through LMAs. Bilateral agreements have been signed with all 10 provinces and 3 territories. The LMAs provide $500 million per year in funding to provincial and territorial governments to cover the costs of these services. The goal of LMAs is similar to that of the LMDAs; funding is intended to increase labour force participation of under-represented groups and to ensure that these groups have the right skills to compete in the labour market.[24]

The federal government also transfers funding to provinces through the Labour Market Agreement for Persons with Disabilities, to support labour market programming and services that have the same overarching goal of increasing employability of persons with disabilities and their employment opportunities. These bilateral agreements for persons with disabilities are set to expire in 2014, thus a new generation of these agreements is currently being negotiated.[25]

With regards to labour market programming for Aboriginal people, a responsibility that falls within federal jurisdiction, one key program is the Aboriginal Skills and Employment Training Strategy (ASETS). Among others, the strategy aims to increase employment and employability of First Nations, Inuit, and Métis by supporting demand-driven skills development, fostering partnerships with the private sector and the provinces and territories, and emphasizing increased accountability and results. Aboriginal bands and organizations who sign agreements to deliver programming under the Aboriginal Skills and Employment Training Strategy are known as ASET holders. The latter receive funding that enables them to offer employment services in line with the goals set for ASETS. Funding for this strategy also includes dollars for delivering services under LMDAs. The Canada Employment Insurance Commission in its 2012/13 EIMAR reported the following on Aboriginal clients.

Aboriginal people participated in 70,004 EBSM interventions, 24.3% more than the previous year. Aboriginal people also participated in 6.7% of all EBSM interventions delivered in 2012/13, including programming delivered through ASETS. A total of 56.9% of Aboriginal clients participated as non-insured clients. Aboriginal participation in Employment Benefits fell from 4.6% to 4.0% year over year.[26]

The Aboriginal groups that appeared before the Committee suggested that the new generation of LMDAs should have more funding earmarked for Aboriginal people.

The price of funding will be paid back in building a dynamic future for First Nations people of our land and all Canadians. With the proper investment and support by the federal government, we can meet our mutual goals, and we can build stronger communities and a stronger Canada.[27]

Nelson Leon
Adams Lake Indian Band

ASETS is scheduled to end in March 2015. ESDC is consulting with ASETS holders, service delivery organizations, national Aboriginal organizations, provinces and territories, major employers, and other stakeholders on the renewal of Aboriginal labour market programming. The Committee studied this topic and provided its recommendations in the report Opportunities for Aboriginal Persons in the Workforce tabled in the House of Commons in May 2014.[28]

D. Recommendations for the new generation of Labour Market Development Agreements

Overall, witnesses told the Committee that the LMDAs are flexible, relevant, responsive and cost-effective. They stated that they provide essential training that is pertinent to the labour market, and that produces good outcomes for some key measures. Some witnesses mentioned that the renewal of the LMDAs is a good opportunity to review training programs currently offered to ensure that they are still meeting the needs of workers and employers, and to make changes where necessary. Many witnesses stated that it was very important to maintain flexibility in the new generation of LMDAs to allow provincial and territorial governments to adjust their training to the needs of their population.

Provincial governments, as well as their regional and local offices, have now developed a significant capacity, expertise, and knowledge in the policy domain. The current agreements have provided provinces with enough flexibility to match programming to local conditions, thereby improving program effectiveness.[29]

Donna Wood
As an Individual

RECOMMENDATION 1

The Committee recommends that the federal government in collaboration with provincial and territorial governments ensure the Labour Market Development Agreements provide flexibility to allow jurisdictions to tailor programs to the needs of their local labour markets.

RECOMMENDATION 2

The Committee recommends that the federal government in collaboration with provincial and territorial governments conduct a review of the effectiveness of current programming, while respecting the general guidelines set in the Employment Insurance Act.

Raising awareness about the training funded by LMDAs is another challenge that was brought up during the course of the study. The Committee was told that better information about LMDAs should be provided to target groups, including employers and workers, to increase their participation in training programs. Raising awareness of employers is discussed in Chapter 6. For example, Mary-Lou Donnelly, Commissioner for Workers, Canada Employment Insurance Commission, told the Committee that:

It’s another one of our issues that we really see when we talk to people about LMDAs; they don’t know that the money’s there. They don’t know it exists. Employers don’t know about it. Employees don’t know about it.[30]

Mary-Lou Donnelly
Canada Employment Insurance Commission

A few witnesses also mentioned that the new generation of LMDAs should be easy to administer, cost-effective and have less bureaucratic paperwork to facilitate the involvement of target groups that can benefit from the training programs and other activities in the LMDAs.

Many witnesses asked for increased funding of LMDAs. One of the reasons expressed to the Committee to explain the need for further funding was that the amounts transferred to provincial and territorial governments have remained stagnant since the signing of the first bilateral agreement in 1996 but on the other hand, labour market and training demands have evolved substantially. For example, the Commissioner for Workers stated that:

Labour stakeholders are in support of increasing the funds for the LMDAs. The EI Act allows for up to 0.8% of total insurable earnings, which translates roughly as $4.4 billion, to be spent on LMDA funding, yet we are currently only using $1.9 billion. Because there hasn’t been an increase of this amount since the inception of the LMDAs, the same amount of dollars in 2014 does not go as far as they did in 1996.[31]

Mary-Lou Donnelly
Canada Employment Insurance Commission

RECOMMENDATION 3

The Committee recommends that the federal government consider increasing the amount of funding to be transferred to provincial and territorial governments’ Labour Market Development Agreements subject to clear demonstration of Employment Insurance savings to the operating account and premium payers.

The Hon. Jason Kenney, minister of ESDC, discussed the need for provinces and territories to demonstrate the EI savings generated by their LMDA programming:

[T]o prove that the LMDA programming generates EI savings is an issue we've raised. Right now EI claimants are using about two-thirds of their part one benefits before returning to work. What more can be done to get people to return to work more quickly and thereby reduce net EI spending?

Really, what I'm raising here is the possibility of paying for results; that is to say, if provinces can reach out proactively to the recently unemployed, get them good programming and back into work right away, it will have the effect of reducing the payout of EI benefits to them.

Perhaps we should acknowledge that saving to the EI fund by giving a pay for performance bonus, as it were, to the province or the program delivering those results. We see pay for performance becoming a very interesting initiative in many countries and it seems to be producing pretty good results. Is there some way we can measure performance and perhaps compensate provinces that get the recently unemployed back to work faster?[32]

Hon. Jason Kenney
ESDC

RECOMMENDATION 4

The Committee recommends that the federal government in discussion with provincial and territorial governments consider adding a clause in the re-tooled Labour Market Development Agreements requiring the funding to be reviewed every set number of years based on demonstrated savings to the Employment Insurance account.

Others talked about the need to modernize the allocation formula for LMDA funding. For example, Matthew Mendelsohn, Director, Mowat Centre, mentioned the fact that the allocation formula is not up-to-date and that as a result provinces and territories are not necessarily getting their fair share of LMDA funding.

The allocation of the LMDA is based on no fair or rational allocation formula, nor is the allocation formula well described publicly. One of the main reasons for the skewed distribution of LMDA funding, which discriminates against Ontario’s unemployed who are seeking to get job training, is that $800 million, almost half of the LMDA funding, is allocated between provinces based on the relative impact on different provinces of the EI reforms in 1996.

…

[T]he 1996 formula has to be updated. It has to be more in line with the contributions made by provinces, or it has to be per capita, or it has to be really needs-based, but right now tying it to changes from 1996 makes no sense.[33]

Matthew Mendelsohn
Mowat Centre

The Committee also heard from Marie France Kenny, president of the Fédération des communautés francophones et acadienne du Canada (hereafter “the Fédération”) who explained that LMDAs have language provisions to ensure that provincial governments in receipt of LMDA funding respect their obligations under the Official Languages Act. The latter includes a requirement that federal offices communicate and deliver services in both French and English where the numbers justify it (part IV of the Act) and provide positive measures (part VII of the Act) to ensure that the francophone communities have access to the kinds of training that they are looking for and the supports they need to search for employment. Under the LMDAs, these obligations are devolved to the provincial and territorial governments delivering the training programs and services.[34]

While the Fédération pointed out that “during the negotiations on the renewal of labour market agreements, the federal government showed leadership on the inclusion of firm and clear language clauses”[35], its main criticism had to do with the implementation of these obligations, which is imperfect in their view. The Fédération is disappointed with the lack of accountability measures in the agreements, as provincial and territorial governments do not account for what actions they have taken in respect of their linguistic obligations in their annual reports on LMDAs.